From Unbanked to Homeowner: Improving the Supply of Financial Services for Low-Income, Low-Asset Customers

The paper emphasizes that the financial services system can play a major role in the relationship between income and asset building only if the financial service providers encourage their accountholders to make full and effective use of the broader suite of services, including savings and investment vehicles.

As per the paper, the most significant opportunities for near-term success are in:

• The workplace as an access point and distribution channel;
• Remittances;
• Stored value cards;
• Bank/non-bank partnerships;
• Self service delivery.

The paper elaborates that adoption of these five broad strategies for closing the supply gap to connect low-income consumers with asset-building opportunities is important since:

• They do not require wholesale government intervention or subsidy;
• They show the potential of reducing customer acquisition cost;
• They do not require the expense of entirely new platform;
• There exists a significant amount of firm-level innovation.

There are a number of barriers to increase asset-building opportunities for low-income, low-asset consumers, many of whom are unbanked or underserved by traditional financial institutions. Some of these hindrances are:

• Conservative banking industry;
• Requirement of larger volumes to compensate for small transaction sizes;
• Little specialized industry information regarding the financial preference of low income consumers;
• Difficulty in finding appropriate partnerships for promising strategies;
• Extremely complex regulatory setup.

The paper concludes that:

• There has been some development in the financial services;
• Many barriers to asset building by the unbanked and underserved remain;
• If the financial services industry is willing to think and act creatively, it can find profitable ways to meet the financial needs of low-income consumers.